European Central Bank “obfuscation” likely to fuel market volatility

Nick Beams

The European Central Bank has left markets uncertain as to the future of its bond-buying program, deciding to discuss its direction at its next meeting in December. At this stage the scheme, under which the ECB makes purchases of €80 billion a month, is due to run in its present form until March 2017.

Speaking after a meeting of the ECB’s governing council in Frankfurt yesterday, in which it left all its monetary policy settings on hold, president Mario Draghi said: “Our decisions in December will tell you what we are going to do. That will define the monetary policy environment for the coming weeks and coming months.”

Draghi said the reason the ECB was waiting until December was because “we want to see all the inputs that are useful to have this discussion” and which will “ensure the smooth implementation of the purchase program until March 2017 or beyond if necessary.” He said it was “unlikely” there would be an abrupt end to bond-buying, indicating that it would gradually reduce purchases, that is, “taper” them.

The move not to make a decision is likely to mean that bond markets, already disturbed by the consequences of Brexit and the fall of the British pound, will remain volatile.

James Athey, fixed income manager at Aberdeen Asset Management, summed up the attitude in financial markets. “This was not Draghi’s finest hour,” he said. “He really wanted to shut down any suggesting that the ECB is going to taper any time soon. But what he actually did was to tell people to come back in December and see what the ECB thinks then.

“That will leave enough unanswered questions to keep bond markets volatile. An already nervous market will not take much comfort from his obfuscation today.”

The reason for the delay in the decision is not that the ECB wants more information before it makes a decision but the expectation that any move to further extend bond-buying will provoke intense opposition from Germany, which has only reluctantly gone along with monetary easing.

That opposition surfaced in an interview given by former ECB chief economist Otto Issing who was one of the architects of the single currency. In an interview with the journal Central Banking he said the ECB was becoming dangerously over-extended and the euro project was unworkable in its current form.

“Realistically, it will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly,” he said. “One day, the house of cards will collapse.”

Issing said the ECB already held more than €1 trillion worth of bonds purchased at “artificially low” or negative yields. This would bring large paper losses once interest rates begin to rise. Bond yields and their prices move in an inverse relationship.

Issing warned that an exit from the quantitative easing policy was becoming more and more difficult with the consequences becoming potentially more disastrous.

“The decline in the quality of eligible collateral is a grave problem. The ECB is now buying corporate bonds that are close to junk,” he said.

Issing’s views are not confined to him but are reflected throughout the German financial establishment.

At his press conference following the governing council meeting Draghi was asked about comments by German finance minister Wolfgang Schäuble that there was too much liquidity in the market and whether he feared there could be German opposition to an extension of quantitative easing.

Draghi sought to deflect the question, stating that he thought Schäuble was referring to world liquidity and not directly to the euro zone and repeated his call that countries with “fiscal space”—thereby enabling them to increase government spending and boost the economy—should use it. “Germany has fiscal space,” he said.

The concern in financial markets over the direction and duration of the ECB’s monetary policy stems from fears that the rise in interest rates which would result from its cessation could spark a sharp fall in bond prices and lead to significant losses.

An analysis by Goldman Sachs issued earlier this week warned that bond investors could suffer major losses if interest rates suddenly increased. It concluded that a 1 percent rise in rates could inflict a loss of $1.1 trillion—a larger loss for bondholders than at any other time in history. Such an outcome was “far from a tail scenario”—that is, it did not have an extremely low, or negligible probability.

The Goldman study pointed out that there had been a shift to longer bond market maturities, which were now more than double the inflation-adjusted level of 1999. These longer-term bonds are more likely to experience an increase in interest rates. The “notional amount of duration dollars at risk is unprecedentedly high,” it said.

Reporting the findings, a Bloomberg article noted that Goldman’s $1 trillion loss estimate only took into account dollar-denominated investment grade bonds and may be a “conservative estimate.” It excluded a “whole gamut of risks,” including from “junk bond obligations, the trillion-dollar pile of fixed-rate mortgages, and corporate loans held on bank balance sheets.”

Conflicts in the ECB are not the only potential source of volatility in financial markets. There is clearly a deepening split in the US Federal Reserve over whether and when interest rates should again be lifted following the 0.25 percentage point rise last December. Initially it was thought that there could be as many as four rises this year. However, at every meeting so far this year, the Fed has kept interest rates on hold. But opposition is growing with the September meeting resulting in a split vote of seven to three to maintain the status quo.

In a major speech last Friday, Fed chairwoman Janet Yellen, the chief supporter of the present low-interest rate regime, indicated she was in favour of “high pressure” policies, based on the maintenance of ultra-cheap money, to try to boost the economy and lift inflation.

But this perspective was countered by Fed vice chairman Stanley Fischer in a speech to the New York Economic Club on Monday. He said if the Fed kept going until the inflation rate “shows us we’re wrong, then you’re going to change too late” and attempts at “overshooting” had not been successful.

Michael Gapen, Barclay’s chief economist in New York, told Bloomberg that Fischer’s comments “reflect an ongoing divergence of opinion” at the Fed. Fischer “doesn’t see much room for running the economy hot” while Yellen’s views “seem to provide a wide-open door to do that. You have a chair and a vice chair who see policy quite differently now,” he said.

Divergences in the Fed and conflicts in the ECB express the growing perplexity in financial circles over the failure of all the measures undertaken so far to provide a boost to the global economy, eight years out from the financial crisis of 2008, and could become the source of major financial instability in the coming period.

Philippine president declares “separation from the US” during visit to China

Oscar Grenfell

Philippine President Rodrigo Duterte made a series of extraordinary comments in Beijing yesterday, denouncing the Obama administration and suggesting the Philippines would break economic and military ties with the United States.

His remarks were the most explicit in a series of statements by Duterte, since the right-wing populist was elected president in June, distancing the Philippines from Washington, the country’s closest military ally and former colonial ruler, and calling for greater economic and trade ties with China.

Duterte’s latest comments have been met with bewilderment and consternation from US officials, who view the Philippines as central to their military build-up throughout the Asia-Pacific, aimed at preparing for war with China. The previous administration of Benigno Aquino functioned as the point man for the US “pivot to Asia,” aggressively prosecuting territorial disputes with China over the South China Sea.

Speaking to a business audience at a Philippines-China Trade and Investment Forum on Thursday, Duterte reportedly branded the US “arrogant” and denounced it for imposing its dictates upon countries throughout the region.

“In this venue, I announce my separation from the United States both in the military... but economics also,” Duterte declared. “I have separated from them so I will be dependent on you (China) for a long time but don’t worry we will also help.”

The Philippine president said: “America has lost now.” He added: “I’ve realigned myself in your ideological flow and maybe I will also go to Russia to talk to [President Vladimir] Putin and tell him that there are three of us against the world—China, Philippines and Russia. It’s the only way.”

These comments were made amid mounting tensions between Washington and the Putin regime over the US-NATO military build-up in Eastern Europe and the US-led regime-change operation against Syria, one of Russia’s closest allies in the Middle East.

On Wednesday, addressing a group of Philippine expatriates in China, Duterte repeated his previous public denunciation of Obama as a “son of a whore.” Referring to the US, he said: “Your stay in my country was for your own benefit, so time to say goodbye my friend.”

Duterte arrived in China for a four-day visit on Tuesday and declared that his trip marked a “reconfiguring” of Philippine foreign policy. He made clear that he would seek to cement economic and trade deals worth billions of dollars with the China, the country’s second largest trading partner. Among his entourage are as many as 400 prominent Philippine business leaders.

The Chinese regime laid out the red carpet for Duterte. His trip included meetings with top Chinese leaders, including President Xi Jinping, Premier Li Keqiang and National People’s Congress chairman Zhang Dejiang.

During their meeting yesterday, the Chinese president declared it was a “milestone,” while his Philippine counterpart spoke of “springtime” in relations between the two countries. The Philippine Trade Secretary Ramon Lopez said on Thursday that $13.5 billion in trade deals were being finalised during the visit. Xi reportedly committed to $9 billion in low-interest loans to Manila.

Most significantly, Duterte indicated that his government could be willing to drop its disputes with China over the South China Sea.

Duterte declared that the July 12 ruling by the Permanent Court of Arbitration in The Hague in favour of a Philippine case against China’s activities in the South China Sea was merely “a piece of paper with four corners.” He appeared to give credence to China’s territorial claims, stating: “The arbitral award gives us the right. China has the historical right.”

These comments are undoubtedly a source of intense anger within the US government, which has stoked long-standing territorial disputes in the South China Sea to place pressure on Beijing, and legitimise the vast deployment of the American military to the region.

The Philippine legal challenge was drafted by a Washington-based law firm with close ties to the Obama administration. The US navy has conducted three incursions into Chinese-claimed waters, on the pretext of defending “freedom of navigation” against supposed Chinese expansionism.

China and the Philippines have reportedly agreed to open bilateral negotiations on their territorial disputes, and will establish a joint committee between their coastguards. Duterte did not raise with Xi the issue of the Scarborough Shoals, which have been a source of conflict between the two countries and of which China took control in 2012. But a Reuters report, based on unnamed sources with ties to the Chinese leadership, indicated that Beijing may be willing to grant Filipino fishermen access to the shoal.

US State Department official John Kirby yesterday responded to Duterte’s comments by declaring they were “inexplicably at odds with the very close relationship” between the US and the Philippines. Kirby said Washington was “going to be seeking an explanation of exactly what the president meant when he talked about separation from us.” It was “not clear to us exactly what that means and all of the ramifications.”

Pointing to the broader implications of Duterte’s statements for Washington’s attempts to draw Vietnam and other South East Asian countries into its confrontation with China, the Wall Street Journal featured comments by Malcolm Cook, a senior fellow at the ISEAS-Yusof Ishak Institute in Singapore. Cook noted: “Claimants like Vietnam and Malaysia can no longer piggy-back on the Philippines’ arbitration win to counter China’s territorial assertions.”

Reports in the Philippines press recalled that Duterte’s erratic and profanity-laden pronouncements are often subsequently “corrected” by presidential officials.

Duterte previously denounced the Obama administration, but stopped short of breaking off the close ties between the two nations. He is seeking to balance between the country’s strategic alliance with the US and its economic ties to China. The government declared an end to war games with the US last month, and at the beginning of October, suspended joint exercises in the South China Sea.

While calling for a review of the 2014 Enhanced Defence Cooperation Agreement (EDCA), which provides for a vast expansion of US military basing arrangements in the country, and even threatening to end it, Duterte has not moved to cancel the deal. Previous declarations from Duterte have not been acted upon, including a September 12 demand for US special forces to leave Mindanao, which was contradicted by the president’s defence and foreign affairs secretaries.

Behind the scenes, Washington and its substantial constituency of supporters within the Philippine ruling elite and military are no doubt making contingency plans. Ahead of Duterte’s trip, Supreme Court Justice Antonio Carpio warned that the president would be in violation of the constitution, and could be impeached, if he gave up sovereignty over the Scarborough Shoals.

Max Boot, a senior fellow at the Council of Foreign Relations, which has close ties to the US government, wrote today in Foreign Affairs: “This massive geopolitical shift is entirely Duterte’s doing. It cannot be explained any other way. It is a product of his peculiar psychology.” In a thinly-veiled call for Duterte’s ouster, Boot concluded: “The only good news from the American standpoint is that what Duterte is doing could be undone by a more rational successor, assuming that democracy in the Philippines survives this time of testing.”

Medicare overhauls doctor payment rules

Brad Dixon

Last week the Centers for Medicare and Medicaid Services (CMS) unveiled its new rules for how Medicare compensates doctors for services. Under the guise of providing “quality” care, the new rules are part of a cost-cutting strategy that incentivizes doctors to ration care for patients.

In April of last year, President Obama signed the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. The 2,400-page bill had support from both the Democrats and Republicans, reflecting the bipartisan nature of the attack on all remaining “entitlement” programs.

The bill phases out the “fee for service” system, in which doctors were paid based on the volume of services provided, replacing it with a payment structure that provides financial incentives for doctors to cut costs and reduce the volume and frequency of the health care services they provide.

MACRA was presented as a permanent fix to the 1997 law that tied doctors’ compensation to the sustainable growth rate (SGR), a formula that rarely kept up with rising health care costs and would have drastically cut their reimbursement rate. Since 2002, Congress intervened and raised physician payment rates 17 times to make up for the shortfall.

According to the new payment schedule, payments to doctors will increase 0.5 percent annually through 2019, then freeze for six years, followed by modest increases. However, starting in 2019 doctors will be eligible to receive larger reimbursements by participating in two new tracks or payment systems that provide financial incentives to provide “quality” care while reducing the volume of services.

CMS estimates that 70,000 to 120,000 clinical practitioners will be in a position to participate in Alternative Payment Models (APM) starting next year. By employing electronic medical records and reporting quality measurements to the government, doctors can earn financial rewards for meeting these standards, or lose money for failing to do so. Providers who are ready to or have already begun making “quality-based” changes can use this track.

In one example of an APM, health care providers and suppliers can voluntarily come together to coordinate health care at lower costs by forming accountable care organizations (ACOs). These will be rewarded for reducing costs while supposedly meeting performance standards on quality of care.

The goal is to eventually move all Medicare providers to the APM track.

In the meantime, an estimated 590,000 to 640,000 clinicians are expected to enroll in the Merit-Based Incentive Payment System (MIPS), where doctors will have lower financial risks and rewards compared to APMs. The purpose of this track is to introduce clinical practitioners to “quality-based” programs, i.e., programs that reduce the quantity of medical services by supposedly improving them.

The performance of clinical practitioners will be rated based on quality standards, making improvements, and employing electronic medical records. In 2018, a cost category will be added to calculate doctors’ payment adjustment.

The first performance period begins on January 1, 2017 and closes at the end of the year. Physicians will then submit data on their practices by March 31, 2018. CMS will provide feedback on the doctors’ performance, which will determine the payment adjustments made starting January 1, 2019.

Payment adjustments can be increased or decreased by up to 4 percent, and the adjustments will increase annually until a potential maximum adjustment of 9 percent is reached in 2022.

The increase in payments to doctors will be funded by premium hikes to Medicare recipients based upon income.

Another 380,000 clinicians with smaller practices will be exempt from the MACRA because they care for fewer than 100 Medicare patients annually and bill Medicare less than $30,000 a year.

The performance of physicians is based upon the quality measures developed in the CMS’s Quality Measure Development Plan (MDP). They include “overuse measures” such as the “overuse” of clinical tests and procedures.

The MDP claims that an underuse of services would be an unintended consequence of clinicians focusing on overuse measures. Actually, however, reducing use of services to the point that patients suffer is a deliberate goal of the policy.

The passage of the MACRA represents a major assault on Medicare. Republican House Speaker John Boehner, who along with Democratic representative Nancy Pelosi drafted the legislation, called the bill the “first real entitlement reform in nearly two decades,” since the abolition of cash welfare payments in 1996 by the Clinton administration. When the bill passed, the right-wing National Review praised the legislation in an article headlined, “A Medicare Bill Conservatives Need to Embrace.”

The Affordable Care Act, which aims to lower health care costs for the government and corporations by rationing care, is substantially reducing Medicare spending. The Congressional Budget Office estimated in 2013 that the ACA would reduce Medicare spending by $716 billion between 2013 and 2022. The ultimate aim of the ruling elite is to transform Medicare, which has improved the health and welfare of millions of seniors since its inception, it into a poverty program with minimal coverage—whether through means testing, some type of voucher program, or through outright privatization.

Medicare, signed into law by President Lyndon B. Johnson on July 30, 1965, was the last major reform issued by the ruling class. Like the reforms pushed by the Roosevelt administration in the 1930s, such as the Social Security Act and the recognition of the industrial unions, Medicare was a concession by the ruling class in the face of major struggles by the working class. Ever since this time, the ruling class has sought to roll back and eliminate these popular programs, a process that has only intensified since the onset of the 2008 economic crisis.

The 2016 elections: American democracy in shambles

Joseph Kishore

In the aftermath of the final presidential debate on Wednesday, the US media is in an uproar over statements made by Republican candidate Donald Trump that he might not recognize the result of the November 8 election.

Asked by debate moderator Chris Wallace from Fox News whether he would “absolutely accept the result of this election,” Trump replied that he would “look at it at the time,” and would “keep you in suspense.” On Thursday, Trump climbed down on his remarks somewhat, saying that he would “accept a clear election result.” However, arguing that Clinton “is the most corrupt and dishonest person ever to seek office,” he added that he would reserve the right “to contest or file a legal challenge in the case of a questionable result.”

Trump’s comments at the debate are in line with previous statements that the election is rigged by the media in favor of Clinton, and his assertions, which clearly have racist overtones, that millions of Americans, particularly in urban centers, are voting illegally. He is pitching his appeal to conditions that will develop after the elections, seeking to channel social anger and hostility to the entire political system in an extremely right-wing direction.

From the media and dominant sections of the political establishment, the response has been universal condemnation of Trump for besmirching the purity of American democracy. The Washington Post proclaimed that “respecting the will of the voters has since the end of the Civil War allowed for a peaceful transition of power that has made this country the envy of the world.” The New York Times added that Trump has turned from “insulting the intelligence of the American voter to insulting American democracy itself.”

Republican Senator and former presidential candidate John McCain issued a statement declaring that a concession to the victor in an election is “an act of respect for the will of the American people, a respect that is every American leader’s first responsibility.” And Vice President Joe Biden, donning the mantle of sanctimonious outrage, said in a speech on Thursday, “If you question, if you assert that a democratic election is fixed, you are attacking the very essence of the notion of whether we have a democratic system.”

These statements from newspaper editorial boards and leading politicians reek of hypocrisy. They also express a nervousness whose causes extend far beyond the comments of Mr. Trump. The political representatives of the ruling class are rushing to the defense of a political system that is increasingly seen as illegitimate by broad sections of the population.

From a historical standpoint, it must first of all be pointed out that until the middle of the 20th century every election in the United States was “fixed,” insofar as large portions of the population were barred from voting. Women were only given the right to vote in 1920. The systematic disenfranchisement of African Americans in the South—through poll taxes, Jim Crow segregation and other measures—was only ended in the mid-1960s, a byproduct of the immense social struggles of that period. And it was only in 1971 that the age of eligibility for the franchise was lowered from 21 to 18. Until then, young men could be drafted to fight and die in wars at the order of a commander-in-chief they could not vote for.

For the past four decades, democratic forms of rule have been under systematic attack, in line with the extreme growth of social inequality. A turning point came with the campaign to impeach Bill Clinton over a sex scandal in 1998 and 1999, followed by the theft of the election in 2000. To the extent that the 2000 elections are mentioned at all in the present discussion over Trump’s comments, it is to praise Al Gore’s “respect for the process” in accepting the Supreme Court decision to hand the election to George W. Bush.

In fact, the 5-4 decision by the highest court in the country to halt the recounting of ballots in Florida installed in office an individual who lost the popular vote and, if all the ballots had been fairly counted, the electoral vote as well. In one of the decisions culminating in this travesty of democracy, the Supreme Court asserted that the American people have no constitutional right to vote for the president of the United States. The rigging of the 2000 election was carried out, not in the back room of a county courthouse, but by the highest court in the land.

In early December 2000, in advance of the decision in Bush v. Gore, WSWS editorial board chairman David North noted that the decision would reveal “how far the American ruling class is prepared to go in breaking with traditional bourgeois-democratic and constitutional norms.” In the end, the blatantly political action by Supreme Court was met with no serious opposition from the Democratic Party and Gore, or from the media and political establishment as a whole. The outcome, as the WSWS wrote at the time, “revealed the lack of any significant constituency within the ruling elite for a democratic adjudication of the presidential election.”

The ruling class has demonstrated its contempt for democracy through its actions over the past decade and a half. The attacks of September 11, 2001 were followed, under Bush and then Obama, by a raft of anti-democratic measures justified by the “war on terror”: the Patriot Act; warrantless mass surveillance; indefinite detention without trial; torture and “extraordinary rendition”; drone assassination, including of US citizens; the establishment of the Department of Homeland Security and the Northern Command, a military jurisdiction to oversee the increasing domestic use of the military. To this list must be added a militarized police force that kills more than 1,000 Americans every year.

As for the electoral process, Supreme Court decisions have undermined the Voting Rights Act and sanctioned state laws requiring photo IDs and other restrictions aimed at disenfranchising poor, elderly and minority voters. Some 6 million citizens (one out of every 40 eligible voters) are barred from voting due to previous felony convictions. The Citizens United decision in 2010 abolished restrictions on big business financing of candidates and their political action committees. It is estimated that more than $7 billion has been spent on the 2016 elections, all told, twice what was spent in 2012.

Everything is done to prevent independent and third-party candidates from having their names appear on the ballot, including requirements that they gather tens or even hundreds of thousands of signatures. Many states will not even count write-in votes. Meanwhile, the media works to ensure that the official “debate” remains safely confined to the narrow framework acceptable to the ruling class.

“American democracy” is a hollowed-out shell, overseen by two parties that are controlled by the financial oligarchy and the military. The experience of the Obama administration—which came to power promising “change you can believe in”—has only demonstrated to millions of people that their vote has no impact on the policies of the ruling class.

The protracted decay of American democracy has culminated in the election of 2016, a contest between a millionaire scion of the Clinton dynasty and a billionaire real estate speculator and reality television star.

Trump himself is a product of a diseased social and political system, the legitimate heir of the “war on terror.” As for Clinton, she is merely another expression of the same disease, running her campaign on the basis of the same scandal-mongering used by the Republicans against her husband, combined with McCarthyite smears that have a long and noxious history.

The Democrats’ stock response to any question about leaked emails exposing Clinton’s ties to Wall Street is to change the subject to the completely unsubstantiated claim that it is all the handiwork of Russian President Vladimir Putin. While Trump has said that he might not accept the election as legitimate, if Clinton is defeated the Democrats will declare that it is the result of Russia’s interference in the electoral process.

Behind the whole rotten process, the fundamental issues are covered up or ignored. The reality of American “democracy” can perhaps be summed up in the fact that, three weeks before November 8, the American military has launched a massive military escalation in the Middle East, and there is no significant discussion about the consequences in an election that is supposedly the principal means through which the population can affect policy.

The crisis of democracy is a product of the decay of American capitalism, overseen by a ruling class that is determined to advance a policy of war abroad and austerity at home—a policy that requires ever greater attacks on democratic forms of rule. Whatever happens on November 8, it will resolve nothing, and only set the stage for a protracted political crisis that can be resolved only through the independent intervention of the working class on the basis of a revolutionary socialist program.

The Russians Have Been Hacking Us For Years, Why Is It a Crisis Now?

Keith Binkly

The would-be incoming presidential administration insists that they should not be held responsible for their security failures in the wake of Russian hacks––a standard radically removed from the one applied to other powerful organizations, in previous hacks of very similar nature.

In fact, the DNC and the Clinton campaign have been portrayed in the media as bearing far less responsibility than either Target or Home Depot did when both were hacked by Russian groups.

Daily exhortations by TV pundits, the White House, Department of Homeland Security, and the Hillary Clinton campaign instruct viewers that these latest hacks targeting campaign chairman John Podesta, and before that the DNC, should be considered acts of Russian aggression meriting an official, even  military response. Indeed, media has already trumpeted a “covert” (because Russians don’t have TV of course) CIA-led cyberattack in retaliation for these Democratic Party breaches.

The question arises: were these latest Russian attacks on American organizations unique? Were they of such a dangerous new nature as to warrant a public escalation of confrontational rhetoric, to the point of increasing the likelihood of war between nuclear powers?

Far from it. Russian groups were behind the 2013 Target and 2014 Home Depot hacks, both of which involved sophisticated attacks breaching their security and compromising record-setting amounts of sensitive data. For being the victims of these hacks, the companies themselves took the brunt of blame in the media. Bloomberg was unsparing in its treatment of Target: they “blew it,” read the headline:

By virtue of doing business, these companies are, by default, expected to safeguard the financial information of their customers. It is incumbent upon them to secure their databases from hacking attempts, and take their lumps from customers and media when they fail to do so — then improve their security to prevent it from happening again in the future.

Imagine for a moment, in the context of the 2016 election season, that Bloomberg ran an article doling out culpability in an equivalent fashion:

Missed Alarms and Thousands of Stolen Donor Credit Cards: How the DNC Blew It.

This headline is virtually inconceivable in the current political landscape.

When Home Depot was hacked by Russians in 2014–– compromising some 40 million customers’ credit card data and home addresses–– lawmakers demanded that the company explain what failings “permitted unauthorized access” to the sensitive information:

Federal lawmakers have begun probing how Home Depot was breached. Senators…sent the company a letter today requesting a briefing.

“We ask that Home Depot’s information-security officials provide a briefing to committee staff regarding your company’s investigation and latest findings on the circumstances that may have permitted unauthorized access to sensitive customer information,” the senators wrote in the letter to Francis Blake, Home Depot’s chairman and chief executive officer.

Notably absent is any mention of either Russian hackers or Vladimir Putin.

In past cases where crime syndicates tied to the Russian government successfully breached a US company’s database, as in the case of a 2014 JP Morgan hack, the media still placed the onus on the hacked institution to explain its failure to secure its databases. Why? Because “companies of our size unfortunately experience cyber attacks nearly every day,” said JPMorgan spokeswoman, quoted in Bloomberg. Cyberthreats are taken as a fact of life in the modern digital world, and accountability lies with the powerful institutions to protect themselves from the inevitable attempts at intrusion. It is expected that large, high-profile organizations with valuable databases will be targets for hackers.

In the case of the 2015 Anthem hack, the health insurer “was the target of a very sophisticated external cyberattack” that compromised “names, birthdays, Social Security numbers, addresses and employment data” of as many as 80 million customers: an identity theft goldmine. Media commentary again held Anthem and its industry accountable: “The breach is a wake-up call to the health industry, experts say,” wrote USA Today.

The 2015 Office of Personnel Management hack was, as Washington Post describes, “one of the most devastating breaches of U.S. government data in history,” carried out by Chinese hackers. In response to this hack, which was indeed unprecedented, the US government soberly announced it would withdraw personnel from China for their own protection. We did not see the White House or the intelligence community publicly weave a plot of aggression on the part of the Chinese state, or build a confrontational and Sinophobic fervor among the American people, as the Clinton camp and media are doing now with Russia. It goes without saying that Xi Jinping has dismal name recognition among Americans, in comparison to bogeyman Vladimir Putin.

In none of these instances did the news media parade out FBI or other intelligence agency findings for the purpose of stoking fear or distrust of the hackers’ home country, nor did they trot out official declarations to retaliate against the originating nation. Rather, the media convention in the previous Russian hacks was to hold the companies who were hacked accountable for their own failure to safeguard the sensitive information they held.

Yet here we are in the 2016 election where the most powerful political machine in modern US history, the likely soon-to-be Clinton Administration, is being held to a lower standard of accountability for its security practices than Target and Home Depot stores. The Clinton team will be expected to manage the safeguarding of information pertaining to the national security interests of the United States. But in a striking departure from all prior reporting conventions on major Russian and Chinese hacks alike, the DNC and Clinton Campaign are portrayed as victims who bear no public accountability for their security failings.

Top Clinton policy aide Neera Tanden, currently the President and CEO of think tank Center for American Progress (and likely future White House Chief-of-Staff) recently took to Twitter to justify the confrontational anti-Russian posturing in terms that would equally apply to both the Target and Home Depot hacks: “@TyHealey no one wants war with Russia, but if they sent military over here to steal property, would you see US as aggressor or them?”

In no uncertain terms, Russian hackers stole massive volumes of valuable data from both companies, and in fact posted the compromised credit card data for sale online on the dark web, the internet’s criminal underbelly. If Tanden believes the Democratic party hacks meet the standard set out in this tweet, so must the Target and Home Depot hacks.

But the DNC, the Clinton campaign, and their allies in the current administration as well as the media have turned just this particular Russian hack into an international confrontation with another nuclear power, where no previous Russian (or Chinese) hack of comparable (or greater!) criminality elicited such a response.

The DNC and Clinton campaign naturally wants to distract from the fact that they failed to safeguard their donors’ and their own sensitive information. After all, their team will assume control of the most powerful executive branch on earth and understandably, do not want the public to doubt their competence in handling information regarding national security — any more than they already do, given Clinton’s long-running email server scandal (key phrase: “extremely careless”).

The mainstream media is now in the extraordinary position of demanding less accountability from the Clinton team, as well the DNC, than it demanded of Target and Home Depot retail chains.

Of course, the Clinton campaign rejoinder is that WikiLeaks is working to alter the outcome of the November election––while simultaneously claiming that nothing “earth shattering” or “shocking” is being revealed. Publishing the inner workings and deliberations of the campaign, while perhaps embarrassing, can only truly threaten to alter the election outcome if something highly damaging is revealed, such as proof of a cover up of criminal intent in the email server saga, or something illegal about the intermingled operations of the State Department and the Clinton Foundation while Hillary was Secretary of State.

If the Clinton campaign’s alarms of election-altering intent on the part of WikiLeaks is credible, then the aggressive anti-Russian posturing must be taken as a signal that truly damaging evidence is yet to be released.

If nothing so consequential is in store, we are forced to consider the disturbing possibility that fomenting escalated conflict and maybe even direct war with Russia may itself be a foreign policy aim of an incoming Clinton administration. This is an extreme scenario, but a foreseeable one given the fact that a no-fly zone in Syria (which Clinton has repeatedly endorsed) entails war with Russia. This is in addition to the reported aims of the cyberattack, which are “harassing” and “embarrassing” Russian leadership, when Putin is already paranoid about Clinton’s penchant for regime change.

Elements of both is certainly a possible explanation; which is to say, escalated conflict with Russia may serve as a very cynical and destructive distraction from criminal revelations yet to be published through WikiLeaks. A two-birds-with-one-stone strategy, as it were.

In June, when news initially broke of the DNC and Clinton Foundation hacks, Democrats explained that the Red Scare narrative would in fact be their deflection strategy:

If the Democrats can show the hidden hand of Russian intelligence agencies, they believe that voter outrage will probably outweigh any embarrassing revelations, a person familiar with the party’s thinking said.

The Democrats have by now gone much further than showing a Russian hand in the hacks. The record shows that such public militating against Russia (or China for that matter) has no precedent as a response to a comparable hack, theft, and publication of private US information.

One must wonder whether these extraordinary and potentially dangerous escalations are designed either to distract from more than just “embarrassing revelations”––or to set the stage for a ramp-up in US anti-Russian aggression.

The War on Drugs is a Racket

David Rosen

On a recent segment of Democracy Now, Tess Borden made an impassioned plea for the U.S. – both federal and state governments — to end the criminal prosecution of those possessing or using illegal drugs.

Quoting from a new report from the ACLU and Human Rights Watch (HRW), “Every 25 Seconds: The Human Toll of Criminalizing Drug Use in the United States,” Borden observed, “Every 25 seconds someone is arrested for possessing drugs for their own use, amounting to 1.25 million arrests per year.”  She reminded her audience, “These numbers tell a tale of ruined lives, destroyed families, and communities suffering under a suffocating police presence.”

The study is an impressive piece of rigorous research and analysis as well as a statement of moral conviction: it’s a political call to decriminalize all personal drug use.  It paints a devastating portrait of not simply the nation’s failed anti-drug policy, but reveals it to be a mean-spirited, moralistic – and racist — program of social repression.

Among the study’s key findings are:

+ Yes, every 25 seconds someone in the U.S. is arrested for the simple act of possessing drugs for their personal use.

+ Sadly, more than 1.25 million people are arrested each year for drug possession – this is more than for any other crime.

+ More than one of every nine arrests by state law enforcement is for drug possession — four times more people are arrested for possessing drugs as for selling them.

+ There are at least 137,000 men and women imprisoned for drug possession — 48,000 in state pens and 89,000 in local jails (most in pretrial detention).

+ This population consists predominantly of inner-city dwellers – African-American and Hispanic and largely youthful offenders.

+ In 42 states, possession of small amounts of most illicit drugs other than marijuana is either always or sometimes a felony offense; only eight states and the District of Columbia make possession of small amounts a misdemeanor.

+ State rates of arrest for drug possession range from 700 per 100,000 people in Maryland to 77 per 100,000 in Vermont.

A bust every 25 seconds adds up.  As the study reminds readers, “tens of thousands [of people] are convicted, cycle through jails and prisons, and spend extended periods on probation and parole, often burdened with crippling debt from court-imposed fines and fees.”

The study makes clear that the war-on-drugs is a punitive, vindictive form of policing, criminal justice and imprisonment.  It’s easy to be tough on those involved in mostly a victimless crime, drug use.  Cops pick the easiest target, notably inner-city minority youth (i.e., “Stop and Frisk”) and, increasingly, rural white youth; prosecutors show off how tough they are by “throwing the book” at some hapless soul; and judges get easily re-elected for being tough on drug criminals, especially people of color and repeat offenders.

The study makes clear that the war-on-drugs is a failure in terms of public policy and the toll it takes on those suffocated by the drug war effort.  Unfortunately, the study suffers from not pushing its inherent argument one critical step further – acknowledging that the police-court-jail system that manages the drug war is a racket, the domestic corollary to the military-industrial complex that Pres. Dwight Eisenhower identified a half-century ago.

***

Almost a century ago, the U.S. adopted the 18^th Amendment establishing abstinence as the law of the land.  Prohibition was inforce for 13 years and was a failure, flaunted by many and leading to wide-scale corruption of law enforcement and politicians.  It was formally terminated with the adoption of the 21^st Amendment in 1933 as the Depression mounted.  Now, nearly a century after Prohibition was proven a failure, we may be witnessing the end to the criminalization of personal drug use.

In the wake of the failure of Prohibition, the U.S. Congress enacted the Marijuana Tax Act in 1937, effectively criminalized marijuana use.  Three decades later, in 1971, Pres. Richard Nixon formally launched the “war on drugs,” transforming a relatively obscure local – and very private – issue into a national concern. He dramatically increased the size and presence of federal drug control agencies; he promoted mandatory sentencing and no-knock warrants; he also placed marijuana in Schedule One, the most restrictive category of drugs; and he called for a national commission to study the drug problem and recommend appropriate policies.

In 1972, Nixon’s drug-policy commission — the National Commission on Marihuana and Drug Abuse, the Shafer Commission — unanimously recommended decriminalizing the possession and distribution of marijuana for personal use. Nixon furiously rejected its recommendations.  And the war-on-drugs has barreled on for the last four decades.

As the Watergate scandal undermined Nixon’s presidency, New York Governor, Nelson Rockefeller launched his presidential campaign in 1973 with a call to toughen the state’s drug laws.  He upped the war against drugs, calling for mandatory prison sentences of 15 years to life for drug dealers and addicts — even those caught with small amounts of marijuana, cocaine or heroin.  In the wake of Nixon’s resignation, Rockefeller became Vice President and his signature effort was to implement his war on drugs as a national campaign.

The punitive anti-drug policy was further strengthened by Pres. Ronald Reagan, leading to a massive increase in incarceration rates.  The Drug Policy Alliance (DPA) estimates that in 1980, “50,000 people were incarcerated for violating nonviolent drug law but by 1997 the number increased to over 400,000 people.”  In 1981, Nancy Reagan proclaimed a new era in the anti-drug wars, championing “Just Say No.”

The DPA also notes that during the mid- to late-1980s, the nation experienced a near-hysterical rage over the alleged threat of illegal drugs.  It points out that public opinion polls in 1985 found only about 2-6 percent of Americans saw drug abuse as the nation’s “number one problem”; however, by September 1989 two-thirds of those polled (64%) considered drugs as the nation’s leading problem.  It adds, “Within less than a year [1990], however, the figure plummeted to less than 10 percent, as the media lost interest.”

A quarter-century later, the drug scene has changed.  During the ‘50s-‘70s, hipsters and hippies, white and black, smoking the evil weed.  In the ‘80s, a “crack cocaine scare” gripped the nation following the adoption of the infamous Anti-Drug Abuse Act (1986); the Act made penalties 100 times harsher for crack than for powder cocaine convictions and 85 percent of those jailed for crack cocaine offenses were black, despite the fact that the majority of users were white.

Americans love to get high.  In 2013, the “legal” drug of choice was alcohol, where nearly three-fifths (58%) were drinkers and nearly a quarter (24%) binge drinkers.  The use of tobacco products (e.g., cigarettes, cigars) among whites is still over one-quarter (28%).   An estimated 25 million Americans were using illicit drugs, about 9.4 percent of the population aged 12 or older; this is up to from the 2002-09 rate of 7.9 percent.  The drugs used were marijuana/hashish, cocaine (including crack), heroin, hallucinogens, inhalants and prescription-type psychotherapeutics.

Marijuana was Americans favorite means of getting high, accounting for four-fifths (81%) of illicit drug users, about 20 million users per month.  Among full-time college students, whites have the highest rate of illegal drug use at 25 percent.

Methamphetamine (“meth”) was once the drug of choice among white males (e.g., outlaw motorcycle gangs and blue-collar guys) and remains so, but is losing its appeal.  In the ‘90s at the height of its popularity, the Open Society estimates there were only one million meth users.  Today, its use has spread to white women and Hispanics.  Columbia University’s Mailman School of Public Health reported that between 2002-2005 and 2008-2011 there was a 75 percent jump in heroin usage among “Hispanics and non-Hispanic whites.”

The new drugs of choice among Americans are psychotherapeutic drugs and heroine.  A 2010 report from the National Survey on Drug Use and Health found that, during 2009, 2.4 million individuals used psycho drugs, including pain relievers, tranquilizers, stimulants and sedatives used for nonmedical purposes.  According to the American College of Obstetricians and Gynecologists, “Adolescent girls and women older than 35 years have significantly greater rates of abuse and dependence on psychotherapeutic drugs than men.”

More troubling, as reported by the Centers for Disease Control (CDC), overdoses (i.e., “drug poisoning”) are “the number one cause of injury-related death in the United States, with 43,982 deaths occurring in 2013.”  It found, based on data from 28 states, that the “death rate for heroin overdose doubled from 2010 through 2012.”   Drilling down, it found there were 8,257 heroine deaths, most involving men aged 25–44 years.

***

No one knows how much money has been spent to fight the failed war-on-drugs.  According to a DPA estimate, “Over the past four decades, federal and state governments have poured over $1 trillion into drug war spending and relied on taxpayers to foot the bill.”  It adds: “Money funneled into drug enforcement has meant less funding for more serious crime and has left essential education, health, social service and public safety programs struggling to operate on meager funding.”

The Drug War Facts website provides a detailed breakdown on annual federal spending on the war-on-drugs for 2013-’17.  It estimates for Fiscal Year 2016, the federal government will spend $30.6 billion.   A third source, the Drug War Clock, estimates that federal spending is about 60 percent of that spent by states (i.e., $49 billion); total spending for the false war-on-drugs at about $75 billion.

The expenditures associated with the war-on-drugs are, like the military-industrial complex, a vast slush fund with costs covering a very wide assortment of federal, state and local – both government and private — services and fees.  Among these expenditures are:

+ Costs of policing, from the border guards to the cop-on-the-block;

+ Costs of prosecutors, courts and defense attorneys;

+ Costs for prisons, jails and probation.

These areas of expenditures do not itemize the directs costs for employment, facilities and upkeep (e.g., food, medical) let alone the profits garnered by private corporations to operate the vast infrastructure required to wage the war-on-drugs.

Nor do these expenditures included the $1 trillion that Americans spent on illegal substances between 2000 and 2010.  In a 2012 study for the White House Office of National Drug Control Policy, Rand estimated the market for four illicit drugs — cocaine (including crack), heroin, marijuana and methamphetamine (meth) – at $100 billion for only one year, 2010.  It noted, “This figure has been stable over the decade, but there have been important shifts in the drugs being purchased.”

With a $100 billion in illegal drug money sloshing through the economy each year, one can only wonder how much of it goes to corruption pay-offs, to law enforcement officials who look the other way.  As experienced during Prohibition, the enormous cash generated by the illegal drug trade leads to endemic corruption.

Finally, as the ACLU and HRW study painfully makes clear, many, many peoples’ lives are destroyed for the possession on illegal drugs.  Unfortunately, it doesn’t mention the way questionable law-enforcement officials, like the notorious Brooklyn NYPD detective Louis Scarcella and former DA Charles Hynes, exploited drug busts to further their careers.  (New York has paid more than $100 million to wrongfully convicted victims of their arrests and prosecutions.)

Its time to embrace the ACLU and HRW’s call to end the criminal prosecution of those who possess or use an “illegal” substance.  Like alcohol, its needs to integrated into the market economy and, like alcohol, effectively regulated in terms of quality and age-of-use.  Sadly, like the military-industrial complex, to many corporations, unions and people with influence have too much invested in the war-on-drugs to see it end.